Aid needed to offset RM20b losses during MCO 2.0

Cash transfers will be the best solution to mitigate pandemic effect on the people’s depleting or lost income

by AZREEN HANI / pic by BLOOMBERG

THE government must focus on providing a safety net in the form of cash transfer for the needy as Malaysia suffers more than RM20 billion losses due to the Movement Control Order reimplementation (MCO 2.0), experts said.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz recently said Malaysia is losing RM600 million daily on MCO 2.0, but maintained the country is expected to ride on higher oil prices and robust recovery in the global export market.

According to the experts, Malaysia will not likely reach the 7.5% GDP growth projection due to MCO 2.0, now entering its fifth week, which is expected to result in negative growth for the first quarter this year (1Q21).

“The issue now is how to ensure people and businesses impacted by the pandemic survive? This is about survival, not about growth, deficits, etc.

“This is about providing the necessary safety nets. Therefore, the discussion should centre on how best to do that,” economist Dr Nungsari Ahmad Radhi told The Malaysian Reserve (TMR).

He said the government has to do what is health-wise necessary to contain the pandemic, but stressed that there will be a price to be paid by the government to aid those affected economically.

“Cash transfers will be the best solution to mitigate the pandemic effect on the people’s depleting or lost income,” he said.

Citing private nurseries or individuals who take care of children as an example, Nungsari added that these people provide an essential service to the economy for without them, parents — mothers particularly — will not be able to go to work.

“The economy will suffer greatly if women’s labour participation rate — which is already declining — gets lower.

“Will the nurseries and daycare providers be around to provide this service when the economy reopens? Help them make sure they survive — cash transfers. Help all those small traders who can’t open their businesses — cash transfers.

“Help those who are self-employed for which the demand for them has diminished — cash transfers. Help those who lost their jobs — cash transfers,” he said.

Nungsari said giving out money does not necessarily mean that fiscal prudence and efficiency should be abandoned.

“It just means we have to do what we have to do and be efficient about it. This is a crisis,” he added.

As for GDP growth, Nungsari said the focus should be on steering Malaysia out of the slump first, and the contingency plan moving forward.

“The recent trade numbers showed clearly that imports have shrunken quite a bit and we have been exporting mainly resources. It gives a deceiving trade surplus number, but it hides the bad state of manufacturing for example,” he said, citing the reason imports are much lower than before, because of the slowdown in the manufacturing engine of the economy.

According to a report by the Malaysian Rating Corp Bhd (MARC) last week, Malaysia’s GDP growth and public investment in 2020 are forecast (2020F) to suffer the sharpest contractions since the 1998 Asian financial crisis at -5.7% and -19.8% respectively.

MARC said all GDP expenditures are expected to decline in varying degrees, but public expenditure will expand by 4.6% year-on-year due to fiscal injections in 2020.

SERC Sdn Bhd ED Lee Heng Guie expected this year’s GDP to be about 4%, and that figure also hinges on the success of Covid-19 vaccination programme.

“This MCO, although halved the loss we had last year, still put a damper on our economy. For the 1Q, we will be in negative territory and our 2Q’s performance may not be as strong as predicted before.

“There should be no flip-flops in our pandemic management or it will cost us more,” he said.

Meanwhile, senior researcher for DM Analytics Sdn Bhd Zouhair Mohd Rosli said the Malaysian Economic and Rakyat’s Protection Assistance Package (Permai) has yet to detail out fiscal injections for daily-wage earners and self-employed.

“When Permai was announced, it was stated that the government will look into fiscal aid, especially for self-employed and daily-wage earners in the Conditional MCO states.

“But subsequently, all the states except Sarawak are under MCO. What is the status of these aids?” Zouhair said.

He also believed cash transfer is currently the best way to help those in need, from self-employed to workers in worst-hit sectors, such as tourism and retail.

He added unless strong, definitive measures are taken, Malaysia is at risk of sharper economic decline and escalating unemployment rate.

Read our earlier report